The Baldwin Insurance Group, Inc.

Greetings and welcome to the Baldwin Group first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Bonnie Bishop, Executive Director, Investor Relations.

Thank you, Ms. Bishop. You may begin. Thank you.

Welcome to the Baldwin Group's first quarter 2026 earnings call. Today's call is being recorded. First quarter financial results, supplemental information, and the company's Form 10-Q were issued earlier this afternoon and are available on the company's website at ir.baldwin.com. Please note that remarks made today may include forward-looking statements subject to various assumptions, risks, and uncertainties, including, for example, our strategy with respect to our capital allocation in the future. The company's actual results may differ materially from those contemplated by such statements. For a more detailed discussion, please refer to the note regarding forward-looking statements in the company's earnings release and our most recent Form 10-Q, both of which are available on the Baldwin website. During the call today, the company may also discuss certain non-GAAP financial measures. For a more detailed discussion of these non-GAAP financial measures and historical reconciliation to the most closely comparable GAAP measures, please refer to the company's earnings release and supplemental information, both of which have been posted on the company's website at ir.baldwin.com. I will now turn the call over to Trevor Baldwin, Chief Executive Officer of the Baldwin Group.

Good afternoon, and thank you for joining us to discuss our first quarter results reported earlier today. I'm joined by Brad Hale, Chief Financial Officer, and Bonnie Bishop, Executive Director of Investor Relations. We had a solid start to the year on the heels of closing our partnerships with CAC, OV, and Capstone in the beginning of January. We delivered total revenue of $532 million, adjusted EBITDA of $137 million, adjusted EBITDA margin of 26%, and adjusted diluted earnings per share of 63 cents. Overall, commission and fee organic revenue growth was 3%, and total organic revenue growth was 2%. Adjusting to the impact of the QBE builder book transition, which we lapped on May 1, continued softness in our Medicare business due to the disruption in the Medicare marketplace, and the procedural change impacting the timing of revenue recognition in IAS, overall organic revenue growth would have been 5%. Layering in the impact of the three January partnerships as if they had been owned by Baldwin in both comparable periods, overall organic revenue growth would have been 9%. Collectively, those three partnerships grew 27% over Q1 of 2025, a truly remarkable start to the year. In insurance advisory solutions, overall organic revenue growth was 4%, driven by sales velocity of 13% before layering in the results from CAC and Capstone, which compares to 14% in the prior year period. As a reminder, sales velocity is seasonally lowest in the first quarter as a result of a bulk of our employee benefits renewals booking on 1-1. The impact of rate and exposure in the quarter was a 70 basis point headwind. Including both CAC and Capstone, as if those businesses had been owned in the prior year period, organic growth would have been 10%. Combined sales velocity, including the acquired businesses, was 24%. We are incredibly enthused by the early contributions from CAC and Capstone, which delivered the strongest quarterly results in each of their respective histories. CAC generated new business of 38 million in the first quarter, up 39% compared to the same period in the prior year. And total revenue was $92 million, representing growth of 27% in relation to Q1 of 2025. BAC sales velocity in the quarter was 61% across all product lines and 15% for recurring lines of business. Net growth of transaction-related product lines, which consists primarily of our transaction liability and certain project-specific construction lines of business, was 22%. Going forward, we will report sales velocity on an aggregate basis, as well as broken out for recurring lines of business. Separately, we will call out net growth in transaction-related product lines. These transaction-related product lines have some variability quarter to quarter due to the variable nature and timing of transactions and project starts. BAC's strong growth in the quarter was driven by strong new business across key specialty industry groups. strength in the private equity and transaction liability practices, which supported several marquee transactions at the nexus of the AI infrastructure build out across the US and globally, as well as strong momentum from cross-sell opportunities between the legacy Baldwin and CAC teams. Our integration work is running ahead of schedule. To date, over $34 million in cost synergies have been actioned, representing nearly 80% of the three-year $43 million target we laid out on our last call. We expect these to materialize in the P&L throughout the balance of this year in 2027. On the revenue side, in the quarter, we realized 1 million of revenue synergies, and as of today, that number has grown to nearly 3 million, with over 10 million in client cross-sell opportunities being actively worked. Four months in, we are tracking ahead of plan on every dimension of this powerful business combination, and the industrial logic we saw is proving to pull through both more quickly and more significantly than we had anticipated. Moving to our underwriting capacity and technology solution segment, organic revenue growth was 3% in the quarter, with core commissions and fees growing by approximately 6%. Importantly, we recognized a large one-time contingent payment in our real estate investor program in the first quarter of 2025, normalizing for which UCTF's organic growth would have been 9% for the quarter. The underlying momentum across the segment remained strong. Our multifamily business grew revenue 10% in the quarter, and Juniper Re grew over 90%. both reflecting the durable scale advantages of our proprietary capacity strategy. We did continue to see pressure in our ENS homeowners book. Our revenue was down roughly 30% in the quarter as we deliberately maintain underwriting discipline in a soft property environment. The transition of our builder book from QBE to BRII, our inaugural reciprocal insurance exchange, remains on track. three is now licensed in seven states in position to begin migration of business outside Texas in the back half of the year. Our second proprietary builder program with Hippo and Spinnaker remains on track to launch later this year. Over time, we expect this to materially increase our capture rate of Westwood's builder business and new proprietary MSI programs from approximately 30% today. a meaningful multi-year growth opportunity for our MGA and a meaningful expansion of vital insurance capacity for our builder partners and their home buyer customers. Our Main Street Insurance Solution segment, organic revenue growth was down 5% in quarter, driven primarily by continued year-over-year headwinds from the QBE commission rate reduction at Westwood and softness in our Medicare business. Normalizing for impacts of those two headwinds, overall organic revenue growth was 7%. We fully lapped the QBE impact on May 1 and expect organic growth in our MIS segment to begin ramping again from here. We're also seeing growing momentum in our embedded mortgage businesses, which went live in April with Fairway Independent Mortgage, a top 10 independent mortgage originator in the country. While Fairway has only been live on the platform for one month, the early signs are very encouraging. The 3B30 Catalyst program is now fully operational. In the first quarter, we executed the first phase of role transformation within IAS and remain on track to deliver $3 to $5 million in-year savings. You can find additional information in the 3B30 Catalyst slide in our earnings supplement. Now let me address the question of AI directly, because it is increasingly central to how we are running this business and how I expect us to outperform over time. We are leaning into AI with conviction. Over the past several quarters, we have been building our own proprietary AI orchestration layer that enables delivery of fully automated workflows. The early productivity gains from the tools we are deploying internally are running upwards of 80%. We are embedding AI directly into our operating platforms, including VIP, our proprietary operating system, supporting the MGA. And we are using AI to elevate and enhance the work our colleagues do every day. Catalyst is the operational expression of this strategy. AI-enabled process redesign, role transformation, and an accelerated path to operating leverage. Said simply, AI is a meaningful tailwind for our business, and we are investing aggressively to capture it. In the question of disintermediation, our thesis is unchanged, and the underlying structural advantages have only strengthened. First, the clients we serve Middle market, upper middle market, and large organizations have complex, multi-location, multi-faceted risks that require deep and specialty advisory solutions, human judgment, and a multitude of risk transfer counterparties and vehicles in order to thoughtfully and effectively manage and finance risk. The CAC combination further shifts our center of gravity of market away from the account segments most exposed to AI commoditization. Second, our embedded distribution strategy places insurance at the point of major life and business transactions, and workflows consumers are unlikely to bypass for a standalone insurance buying experience. Third, our UCTS business vertically integrates our platform across the entire value chain, owning the client relationship, advising on complex risk issues, building proprietary insurance products, and arranging the third-party risk capital that stands behind them. We are the disruptor in this marketplace. The combination of human expertise and judgment, embedded distribution, proprietary product and risk capital formation, and AI-driven productivity is the right architecture for the AI era. As we enter 2026, we are pleased with our first quarter results and confident in our positioning to accelerate performance radably through the year and beyond. The underlying momentum across our segments is strong. The idiosyncratic headwinds we have discussed, the commission change we have now lapped, the Medicare market disruption, and the IS revenue recognition procedural change will all be substantially behind us by the end of the second quarter. CAC is exceeding our expectations on both revenue and expense energy execution. Our Catalyst program is delivering, and we are deploying AI across our platform with real and measurable productivity gains. Quite simply, our business was built for this era. We are leaning in to accelerate our impact and our results. With that, I want to extend our gratitude to our clients for their continued trust in us to provide strategic guidance, expert insights, and innovative solutions. And I want to thank our nearly 5,000 colleagues for their dedication to helping our clients protect what is possible. Now, I will turn it over to Brad, who will detail our financial results.

Thanks, Trevor, and good afternoon, everyone. For the first quarter, we generated organic revenue growth of 2% and total revenue of $532.2 million. Looking at the segment level, organic revenue growth was up 4% in IAS, up 3% in UCTS, and down 5% in MIS. Adjusted for the three transitory items Trevor walked through, underlying organic revenue growth would have been 5%. We recorded gap net loss for the first quarter of $1.9 million or gap diluted earnings per share of $0.02. Adjusted net income for the first quarter, which excludes share-based compensation, amortization, and other one-time expenses, was $89.3 million or $0.63 per fully diluted share. A table reconciling gap net income attributable to Baldwin to adjusted net income can be found in our earnings release, and our 10Q filed with the SEC. Adjusted EBITDA for the first quarter was up 21% at 137.2 million compared to 113.8 million in the prior year period. Adjusted EBITDA margin declined approximately 170 basis points year over year to 25.8% for the quarter compared to 27.5% in the prior year period. The approximately 170 basis point margin decline is fully explained by two items. First, the consolidation of CAC, which has different margin seasonality due to timing and mix of revenues. And second, the UCTS profit sharing contract Trevor mentioned. Adjusted free cash flow for the first quarter was roughly flat compared to 26 million in Q1 2025. The decrease was driven by working capital timing which resulted in a $60 million use of cash. More than half of the working capital headwind was from CAC, given a material payout of approximately $40 million in previously accrued cash bonuses and commissions, which Baldwin assumed in the opening balance sheet. As mentioned on the year-end call, we would expect CAC's free cash flow conversion in the year to be better than legacy Baldwin's rate. As such, we expect the timing headwind to reverse in quarters two through four. It is important to remember that Q1 is expected to be our lowest quarter of free cash flow conversion given the payout of bonuses as well as the substantial receivables that are built in our employee benefits business, the majority of which renew in January with payment monthly throughout the balance of the year. This was somewhat exacerbated in Q1 2026 because of approximately $15 million of CAC transaction costs. representing a material increase in one-time cash outlay. Our full-year cash flow trajectory remains on track for double-digit growth in 2026. We ended the quarter with net leverage at approximately 4.3 times as we deployed approximately 50 million of our 250 million buyback authorization to repurchase 2.2 million shares. We will remain prudent in our share repurchase program as we assess overall market conditions and act on market dislocation opportunities relative to other capital allocation alternatives to drive shareholder returns. The January 2026 partnerships with CAC and OBIEE generated a significant net deferred tax liability, which resulted in a benefit to income tax expense in Q1 of approximately $145 million from the reversal of the majority of our valuation allowance. As an offset to this benefit, we recorded an above the line operating expense to establish a liability associated with our tax receivable agreement of approximately 130 million. Note that the impact of each of these one-time transactions has been removed from adjusted EBITDA and adjusted EPS. We would expect income tax expense slash benefit for the balance of 2026 to be minimal And changes to the TRA liability will largely flow through the balance sheet going forward, with minimal further expected impact on the P&L. There will be no change to the manner in which we calculate the tax impact to adjusted net income in 2026. Looking ahead, our full-year consolidated guidance remains unchanged. Despite the challenging market backdrop, we remain confident in our ability to accelerate our total organic growth throughout the year. For the second quarter, we expect revenue of $485 million to $495 million and organic revenue growth in the mid single digits. We anticipate adjusted EBITDA between $113 million and $118 million and adjusted diluted EPS of $0.44 to $0.48 per share. In summary, we are pleased with the quarter, encouraged by the strong contribution from our recent partnerships across both cost savings and revenue synergies, and by the early operational impact of our 3B30 Catalyst program. Organic growth momentum is building, and we continue to expect a clear inflection in our financial results in the back half of 2026 as we fully lap the idiosyncratic headwinds of the past year. We remain focused on accelerating execution across our platform, fully integrating our recent partnerships into Baldwin and leveraging new and innovative technology and AI solutions to enhance our client impact and long-term shareholder value creation. We will now take questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment, please, while we poll for questions. The first question comes from the line of Gregory Peters with Raymond James. Please go back.

Well, good afternoon, everyone. For my first question, I'd like to focus on the organic revenue results and then briefly the comments you made about the revenue growth at CAC. But I guess one area that caught me by surprise was the result in the UCTS line, which I think he called out there's a one-time item in there. Even on a pro forma basis, it seems like it's tracking lower than I might have envisioned for the year. So maybe you could provide some color there. And then just related to your comments around growth, if you could go back and more slowly go through what seems to be some pretty positive indications of growth coming out of CAC, that'd be helpful.

Yeah. Hey, Greg. This is Trevor. Appreciate the question. So let's start with UCTS. I did mention there was a large one-time contingent item in the prior year period. Normalizing for that, you're looking at 9% organic in the quarter for UCTS. And broadly, what I would say is we continue to have very strong underlying momentum in the UCTS segment. Our multifamily Portfolio grew double digits in the quarter. Juniper reed continues to have very strong momentum with growth of over 90%. And, you know, it's kind of broader evidence for that underlying momentum that we're seeing. We do expect organic growth to recover to high single digits for UCTS in Q2 and back into the teens in the back half of the year. In particular, we're seeing, you know, continued headwinds in our ENS home portfolio as a result of the soft market dynamics. And, you know, as we push through Q1, you know, the impacts of that in the prior year were already fairly material and so should have less of an impact. Specifically, our ENS home portfolio was down 30%. In Q1, however, we expect it to be down, you know, call it high single digits for the full year, which should give you a sense of some of the recovery that we expect there over the balance of the year. So the very high level is the underlying momentum at UCTS continues to be quite strong. It's a double-digit growth business, combination of a one-time item and and kind of an acute prior year period impact from the soft dynamics in ENS Home, which normalized through the balance of the year. Now moving on to CAC, when we announced that partnership, we did it with a ton of conviction at a time when we realized that it was gonna be a large and unexpected partnership. But we had the conviction to do that because of the wisdom that we saw in the industrial logic of the combination, the quality of the people, the scarcity value of the capability set, and how that enables us to continue to grow and strengthen the impact that we can deliver for our clients. I think specifically I made mention of the CAC team is a Ferrari, and we're going to put them on the track and let them run. and they have come out of the gate quite fast. We expected the results to be strong, to be clear, but the strength of the results, I think, even have pleasantly surprised us, both in the speed at which they have pulled through and the scale and the size of the momentum and the opportunities that we're seeing work. And that goes across every dimension of the partnership, whether it's the expense synergies that we had identified of approximately $43 million. We've already actioned over $34 million of that well ahead of plan on the revenue synergy side. And what is typically a fairly long sales cycle, already a million dollars of revenue realized in the first quarter, and as of today, nearly 3 million, with more than 10 million of active cross-sell opportunities being worked by the combined teams. And real strength, not in any one pocket of the CAC business, but just broadly, whether it's the industry practice groups, their legacy middle market business, or their transaction liability group, which has not only had really growing momentum as they take share in the market. But I think that has strengthened as you've combined them with the legacy Baldwin teams who've been able to leverage those capabilities to drive even more significant impact for our existing clients. So it's all incredibly positive.

Great. I think I have to... for my follow-up question to the Catalyst Program slide you put in your slide deck. And, you know, you talk about this initiative in the context of the 3B30, I assume getting to the 30% margin target. Can you walk us through, you know, these run rate annualized savings and the positive payback Does that get us to that 30% run rate that you're thinking about, or is there some more levers you have to pull that are going to help you get, you know, get you to your objective?

Yeah, I think this, on a standalone basis, Greg, doesn't fully get there, but just regular way operating leverage that's in the business in combination with the Catalyst program does. And as I mentioned in my prepared remarks, the program's live, it's on track, and the early results are quite positive. You may have seen earlier this morning a press release around our expanded partnership with Anthropics Cloud on an enterprise basis, as well as my mention in the prepared remarks around the work we've been doing over the past several quarters to build out our own proprietary orchestration layer driving real kind of productivity and efficiency into the operations of our business. So the early signs are quite positive. I can give you a more recent example. In fact, our product team at BMGA recently came together in an effort to build and launch an admitted insurance product, a new product for us. And I'd say historically, creating an admitted product requires a series of competitive analyses, rate and product, feature determination and filing creation tasks. So it's a process that's historically taken months, three on average, and historically requires quite a bit of manual manipulation of documents and data But the product management team leveraged Quad on top of our proprietary data across each phase of the process and significantly compressed the timeline from what would have been months to three days. And so as you think about how that translates into the velocity of new products that we can bring to market, whether that's the new builder product we expect to come later this year, a mortgage product we're working on, or a manufactured home program we're working on for a number of our property management software clients, the impact will be real and significant. So we're quite excited for what we're seeing there.

Yeah, Greg, I would just add it's the combination of the Catalyst program and then, as you're aware, we've made some meaningful investments in the business, such as Mortgage Embedded, in addition to the products that Trevor just highlighted. So the maturity of those businesses is also a meaningful driver of that margin expansion towards the 3B30 goal.

Yeah, that makes sense. Thanks for the detail. Thanks, Greg.

Thank you. Next question comes from the line of Tommy McJoyant with KBW. Please go ahead.

Hey, good evening. You sounded pretty optimistic about the early signs of success around cross-sell with DAC Group. Could you give some examples of where you guys are actually seeing success there? Is it finding new solutions? Is it taking market share from other brokers? Just maybe elaborate on that point.

Yeah, I'd say it's all of those things, Tommy, and it's going both ways. So I can give you a couple of quick examples off the top of my head. The CAC team has deep industry capabilities across natural resources, across private equity, real estate, and we've historically had very deep capabilities across construction. And so one of the CAC colleagues brought forth early in the year an opportunity for a large general contractor prospect that Historically, they probably wouldn't have pursued because they didn't feel like they had all the right capabilities to really serve them at the level that CAC looks to serve their clients. But because of the combination with our platform, they were able to bring in some of our construction professionals. And through an RFP process, we won that client. The incumbent was a top five global broker. Our competition was both the global broker community as well as the large nationals, and it was a standout win and something that brought a ton of energy and momentum to the team as they saw some of the kind of reverse opportunities that could exist. Similarly, we have at Legacy Baldwin some professionals with deep expertise and strong relationships across private equity and in the M&A universe. And CAC has an incredibly deep bench of talent here, not only on the product side around transaction solutions, but also broadly across portfolio solutions. And so the legacy Baldwin team had a client that was entered into a complex cross-border international M&A transaction. And I can't get into a ton of detail because of NDAs, but I can just tell you this was a highly complex transaction. The CAC team was able to step in, deliver a set of solutions that helped facilitate a seamless signing of that transaction. And it's a significant six-figure revenue opportunity for an existing client of Baldwin that otherwise likely would have gone to one of our global broker competitors. So a couple of really exciting opportunities. The pipeline is quite robust, both across construction, energy, data center, and power generation, as well as kind of broad-based, large upmarket complex opportunities. And the momentum continues to build.

Thanks. And then just switching gears quickly to one of the headwinds, one-timers that you've been calling out, the Medicare side. Can you remind us, is the cadence or the seasonality there such that the fourth quarter of 26 that headwinds your debate, or is that more of a 27 when it releases?

We expect that headwind to largely resolve itself beginning next quarter. While we're not expecting kind of a miraculous turnaround in results, we don't anticipate a meaningful headwind going forward there.

Thank you. Next question comes from the line of Charlie Lutra with BMO Capital Markets. Please go ahead.

Hey, thanks. I just want to go back to UCTS for a second. I know you called out the headwind, but you also had a fairly nice tailwind in the earned premium line there. And I guess if I exclude that, you were down a little bit more in UCTS. So was that all U.S. home and the real estate product? And I guess, what's going to drive the improvement over the course of the rest of the year?

Thanks. Yeah, hey, Charlie, that's right. We did benefit from continued growth in the multifamily earned premium in the captive, which we really just view as kind of incremental economics on a high-performing overall program. With that being said, the headwind was, you know, almost entirely the one-time contingent as well as the headwinds in the ENS business. We do expect momentum to pick up across most, if not all, of our product sets over the balance of the year as evidenced by our confidence in high single-digit OG and Q2 and returning to teens OG in the back half of the year. Momentum there is strong, and you've got the nuances of you know, a lapped quarter both from kind of where the NS book stood in the prior year as well as that one-time contingent.

Got it. Thanks. Then maybe just on the buybacks, can you talk about, you know, how motivated you feel now to still buy back shares or, you know, now that the stock is, you know, closer to pierce? maybe it's less of a priority. Thanks.

Yeah, it's Brad. I would say our capital allocation priorities remain intact. We've repeated them in the past, but number one, organic investments, two, M&A, followed by buybacks and then dividends or debt pay down. As I spoke with you guys sort of mid-quarter weeks, We remain, you know, we're not an indiscriminate buyer. We are thoughtful about the price as we're deploying that capital, but continue to target the best risk-weighted return alternative. And to the extent we see dislocation in the price, we'll continue to be active.

Charlie, I mean, put differently, we can continue even at these prices to buy in our own shares at a meaningful discount to what smaller, lower-quality private agencies trade for today. And so we continue to find our stock price attractive.

Thank you. Thank you.

Next question comes from the line of Ellis Griesman with Wells Fargo. Please go ahead.

Hi, thanks. I guess my first question will continue there on the buybacks. You guys didn't raise the EPS guide for the year, but you obviously bought back in the Q1, and it sounds like, Trevor, based on what you just said, you're open to continuing to buy back your shares. So how come you're not raising the EPS guide, or is it just the guidance assuming no additional buyback over the remaining three quarters?

Yeah, at least we're not going to assume how stock price performance is going forward. And to the extent we have the opportunity to buy back shares at an attractive price, that could create some upside. And to the extent we don't, that's because we've seen some recovery and kind of trading dynamics.

Thanks. And then my second question, you guys provided some information some figures on CIC where you were insinuating, highlighting good, pretty strong new business growth and revenue growth in the first quarter. On the three deals, the revenue and EBITDA contributions that you expect for 26 haven't changed, but it sounds like things are running ahead of expectations. So you're just waiting to update that, or is it that some are running ahead and some are running below plan? relative to the guidance you reaffirmed this quarter?

Yeah, at least I'd say broadly the three partnership businesses are running ahead of plan, but we're one quarter in. So it's probably a little early for us to fully extrapolate that. And as I mentioned in my prepared remarks, the momentum at CAC is incredibly strong. some of that momentum's in kind of the transaction liability solutions where there can be some variability quarter to quarter, year to year. You know, the pipeline in that part of the business is, you know, frankly at an all-time high, and we continue to take shares, so we feel good about the momentum, but feel like it's a little early in the year to pull, you know, fully extrapolate that forward into a full year expectations.

And then my last one, just on market impact, I guess, what are you seeing just from a overall pricing perspective in like the property market? We've, you know, heard about some pretty aggressive price declines in that business and how, you know, what are you abetting in there? I guess when we think about, you know, your, your business over, over the next three quarters.

Yeah. The property market is deeply soft. Elise, I'd say we're seeing pricing levels that have returned to call it circa 2017. And for large shared and layered coastal placements, we're seeing rate decreases at times at 30 to 40%. So frankly, at times, things that probably don't make a whole lot of long-term sense, but we're happy to go secure those types of results for our clients who certainly enjoy them. Specific to how we've incorporated that into our expectations, I'd say we do expect to see a more significant rate and exposure headwind in the second quarter, which is the heaviest quarter for property renewals in the year. whereas we saw, call it, 70 basis points of headwind in Q1. I expect that to be 400 to 500 basis points of rate and exposure headwind in Q2. And as a result, we do expect our legacy IES segment to be, call it, roughly flat from an organic standpoint in the second quarter before returning the mid to high single-digit OG in the back half of the year as we fully lap the the procedural accounting change headwinds. I do think that we'll see, based on what we're staring at today, rate and exposure headwinds in the back half of the year pretty close to flat. Maybe it's a slight headwind in Q3 and a slight tailwind in Q4. And overall, you know, with the expectation of kind of heightened headwinds in Q2, we would expect rate and exposure broadly for the year to be probably 100 to 200 basis points of headwind. And all that's fully incorporated into the expectations that we've shared already.

Thank you. Thank you.

Next question comes from the line of Andrew Kliegerman with TD Carbon. Please go ahead.

Hey, thanks a lot. Good evening. I want to follow up on the IAS organic growth. So you had four points in the quarter of organic and then CAC, if it were normalized, contributed four to the overall book. So you're looking at if it were just IAS and CAC had been there for over a year. You're looking at, I think, well into the double digits, which is fabulous. And then your follow-up point was the transaction liability is huge, and that can be a little bit volatile. But as I think, and I'm not asking for explicit guidance, but typically when you do an acquisition, you get a good year one and you get a similar organic in year two. So maybe extracting out the volatility of transaction liability, all else equal, you'd probably be looking at high single into double digits potentially next year once you kind of get a full year. on board. Am I thinking about it right with regard to IAS?

Hey, Andrew. At a high level, yes. It's a double-digit organic growth business inclusive of CAC and capstone results, which we think is really, frankly, a standout outcome in today's market backdrop. Specific to 2027, I think it's definitely a bit early for us to begin opining on how we think about organic growth into next year. However, what I would say is everything we're seeing from an underlying trends and data set standpoint is very positive. Pipelines are building. Cross-sell opportunities are growing. We do expect in the back half of the year legacy IAS, organic to re-rate back up into the mid to high single digits. And as we look at the momentum for CAC and their historical seasonality and what their pipelines look like, it's incredibly strong. So again, early for us to opine on 27, but as we sit here with our crystal ball looking into later this year, And frankly, even reflecting on the quarter that we're discussing right now, incredibly proud of the results. They are, relative to our peers, a complete standout in the quarter, inclusive of CAC and Capstone, and reflect not only the wisdom of this business combination, but the combined strengths of the organization. and how the breadth and depth of capabilities across industry, across product segments, enable us to broadly solve our clients' challenges and deliver the most positively meaningful impact for them to help solve their risk issues and protect what's possible and ultimately grow their enterprises. So feeling really good about the momentum.

That's excellent. And following up on capital management, And again, correct me if I'm wrong, but it sounds like, and I think you answered that. I just want to make sure I heard it right. The intrinsic value of the stock is still attractive here. So I just want to make sure I'm right on that. And then with respect to your leverage, which kind of inched up to 4.3 times, and I think part of that is the buyback, which is great in my view. It inched up, so I'd like to know where you kind of see leverage playing out toward the end of the year. Do you get to that three to four times, or do you think the stock is so attractive that you're willing to kind of let it hover around where it is?

Yeah, so we'd continue to expect it to sort of hover in this four to four and a half times range over the intermediate term. particularly as we continue to execute on the buyback program. Of course, as I said before, we're not price indiscriminate, so that story can change, but that would be our current view. And look, we continue to believe that just mechanically deleveraging six months earlier while our equity trades at this material discount is, quite frankly, a destruction of shareholder value and not a creation of it. you know, we're comfortable at this spot, particularly if we can, you know, take advantage of market dislocation.

And then just one last quick one. So that would kind of, you know, and I think you alluded to this before. It doesn't seem like there's any M&As of major size any time on the kind of near intermediate term horizon, and hence that leverage ratio can hold in the four, four and a half. zone. Is that the right way to think about it?

Yeah, I think it is, Andrew. But the reason for that is it's really difficult for us to find a financially prudent way to structure a deal that makes good financial sense based on where our equity trades today. So that, plus where leverage sits, creates a bit of a hurdle for I think what you've seen certainly as we disclose the results of all three former classes of partnerships from the 2020, 2021, and 2022 cohorts at the end of last year is, frankly, I think we've been able to allocate capital to M&A in a way that's created a lot of value for shareholders intrinsically. And while we're very early days, we appear to be off to what feels like a great start with the 2026 class of partnerships. And so in the confines of kind of our financial leverage policy and objectives to deliver over time and subject to us having a currency that ultimately supports M&A in a creative fashion, we think it's a very good use of capital over time. but the circumstances of the here and now dictate, I'd say, a more narrow set of priorities.

Super helpful. Thank you. Thank you.

Next question comes from the line of Pablo Singson, TV Morgan. Please go ahead.

Hi. Thank you. First, can you unpack what's going on with the E&S homeowners business? I guess I'm just a bit surprised there. I know it's not the first time you mentioned it, but it just seems like, given what other companies are reporting, pricing in homeowners is not experiencing the same pressure as in personal auto. So I'm just wondering, are you dealing with a difference of competitors in that business, and that's why you're a little more cautious?

No, I'd say maybe that's homeowners broadly across kind of admitted in E&S products, but You know, ENS Home specifically, we've seen rate come in 40, 50 plus percent. You know, I'd say, you know, we went from 18 months ago writing 13, 14 million of new premium a month to over the past 12 months averaging two to three. Now, what I will say is, as we've continued to tweak our product, We're also in the process of rolling out multiple new E&S home product variants to better compete in certain pockets of the market that we continue to find attractive. We do expect our new business flow or success to go up. And that we actually saw reflected in March, which had over $4 million of new E&S home premium booked, which is the highest new business month we've seen in the past 12 months. Now, that's one month. It's not a trend. But we feel like we hit the bottom in Q1 and that you will see us continue to march that back up, both through tweaks to product design and pricing in a prudent manner, as well as the rollout of incremental ENS home product variants to compete in corners of the market that we continue to find attractive to resume growth.

Thanks, Trevor. And then for my second question, I was wondering if you could talk about the construction risk-partners business you had acquired some time ago. I think it's a decent-sized portion of IAS, and other brokers have spoken about activity related to data center construction and the like, so I'm curious if you're getting some benefit from that economic activity today. Thanks.

Yeah, the CRP team, the Baldwin Construction Practice, which reflects the historical constructionist partner's business, is the largest and strongest pipeline in the history of our construction business. That's both a combination of an influx of new cross-sell opportunities from our new colleagues and partners at CAC and as well as just a breadth of opportunities at the nexus of the data center and AI infrastructure build out. So what I will say, though, is if you look at the construction market, it's kind of a tale of two cities. So overall expectations for construction spend this year are roughly flat year over year, if not modestly down. However, That's being buoyed by significant spending in the data center arena, offset by slowdowns in non-data center AI infrastructure areas of historical construction activity. And what that means is that ultimately we expect those results to be lumpier because the data center opportunities are fewer but larger in scale. And we both have some of those wins under our belt. as well as multiple kind of very large multi-billion dollar opportunities in the near to intermediate term pipeline and feel good about how we're positioned to take, frankly, more than our fair share of those wins.

Thank you. Thank you.

Next question comes from the line of Josh Shanker, Bank of America. Please go ahead.

Yeah, good evening, everybody. I want to point out that 90% growth in Juniper Re and 27% growth in the new partnerships, it's staggering numbers. But it also implies a great deal of contraction about the legacy businesses that are older in the portfolio. If someone wanted to make the argument that Baldwin has bought growth but not long-term runners, and is once again buying growth. What's the pushback on that thesis? Because the stuff you bought before, CAC and Star Jupiter, is now growing more slowly.

Yeah, I mean, the pushback is in the numbers and the expectations that we've already shared, Josh. So I think the headwinds have been well discussed. You know, the idiosyncratic drivers from Medicare to the IS procedural accounting change to the QBE book rule transition to our reciprocal exchange and normalizing for all three of those, you've got a mid single-digit growth business in the quarter and you've got a business that we expect to grow organically at double-digit rates exiting this year before the impact of the three partnerships this year that grew at 27% in the quarter. So while all businesses have ebbs and flows and the market impacts here are real, as have been, I'd say, broadly discussed, not only with us, but the industry writ large, I think we're relatively uniquely positioned against our peers to be sitting here talking about a business that's going to you know, accelerate to high single-digit and then ultimately double-digit growth by the fourth quarter, despite, you know, no expectation for market headwinds to kind of meaningfully abate.

So you still believe if the insurance distribution industry at year-end is growing at mid to low single-digits, Baldwin will still be growing at high single digits edging towards double digits. That's correct.

Okay. I wish you the best of luck there then. Very good. Thanks, Josh.

Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to hand the floor over to Trevor Baldwin, CEO, for closing comments.

Thank you all for joining us this evening. As I noted at the open, we were pleased with our first quarter and confident in our trajectory to the balance of the year. The momentum here is real. Our embedded distribution, our advisory businesses across our MGA platform, and as evidenced in the integration of our partnerships. And it's the direct result of the work our colleagues are putting in every day. I want to thank our colleagues for how they show up in support of our clients, one another, and for the firm we are building together. To our clients and insurance company partners, thank you for your continued trust. To our shareholders, thank you for your engagement and support as we continue to deliver against our Catalyst 3B30 goals and objectives. We look forward to speaking with you again next quarter. Thank you.

This concludes our today's study conference. You may disconnect your lines at this time. Thank you for your participation.